Craigslist Accuses eBay of Spying

Online classifieds leader Craigslist.com filed a countersuit on Tuesday against business rival eBay, alleging eBay used its minority stake in Craigslist to steal its corporate trade secrets.

In a lawsuit filed in California Superior Court in San Francisco, Craigslist challenged allegations in an eBay suit filed in Delaware state court in April that accused Craigslist of discriminating against eBay as a shareholder.

EBay's suit in Delaware Chancery Court charged Craigslist had used "clandestine meetings" to dilute eBay's 28.4 percent stake in Craigslist to 24.85, or less than a quarter of the company.

In addition to unfair competition and fraudulent business claims, the countersuit accuses eBay of copyright infringement and using misleading advertising on Google to run ads for its rival Kijiji site that appeared to be Craigslist ads.

The lawsuit demands that eBay restore all shares of Craigslist owned by eBay or for the court to require eBay to divest its holdings in Craigslist. The suit asks eBay to disgorge profits tied to the business and for punitive damages.

EBay spokeswoman Kim Rubey responded to Craigslist's lawsuit against eBay, saying: "We regret that Craigslist felt compelled to resort to unfounded and unsubstantiated claims in order to divert attention from actions by Craigslist's board that unfairly diluted our minority interest."

EBay, the world leader in online auctions and payment services, took a minority ownership stake in Craigslist nearly four years ago as part of a strategy to buy up classified advertising services both in the United States and Europe.

In 2004, eBay began to expand into the market through the acquisition of online classified businesses Marktplaats and later, LoQuo and Gumtree. In 2005, eBay launched its own free online classifieds site named Kijiji in nearly a dozen markets in Europe and Asia. A year ago, it entered the United States.

Craigslist and eBay grew out of the same early rush to create Web businesses in Silicon Valley in the mid-1990s.

But their paths quickly diverged as eBay went on to dominate online auction markets, becoming a multibillion company, while Craigslist stayed true to its uncommercial ethic by not charging for most of its local listings.